Why Mortgage Insurance Can Actually Save You Money

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Mortgage insurance provides lenders a form of financial guarantee which covers the lender in cases in which the borrower defaults on a loan. For those looking to buy a home, agreeing to loan terms which include mortgage insurance, increases the purchasing power of the buyer a great deal.

Agreeing to buy mortgage insurance allows individuals the opportunity to buy a home with a down payment of only 5%-10%, as opposed to the 20% that is often required when the lender does no…

Keywords:
mortgage broker, mortgage insurance, mortgage company, bad credit mortgage

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Mortgage insurance provides lenders a form of financial guarantee which covers the lender in cases in which the borrower defaults on a loan. For those looking to buy a home, agreeing to loan terms which include mortgage insurance, increases the purchasing power of the buyer a great deal.

Agreeing to buy mortgage insurance allows individuals the opportunity to buy a home with a down payment of only 5%-10%, as opposed to the 20% that is often required when the lender does not have the guarantee of mortgage insurance.

Buyers typically purchase and pay for mortgage insurance in three different ways. These ways include paying in annuals, monthly premiums, or singles. We are going to take a closer look at the available mortgage insurance payment options below:

1.) Annuals: The annuals payment option allows the lender to collect the first year’s premium at closing and then all subsequent payments are made on a monthly basis.

2.) Monthly Premiums: This payment option requires the buyer to only pay for one month at closing and all remaining payments are then made on a monthly basis.

3.) Singles: The singles payment option requires the buyer to make a one-time single payment that is typically financed as part of the mortgage amount.

Mortgage insurance ensures the lender is covered in cases in which the borrower can no longer pay the loan and defaults on it. It is also a powerful bargaining tool for potential borrowers who are unable to come up with a large down payment. Offering to pay mortgage insurance can decrease the amount of ones’ down payment by 10% to 15%.

But it is important to note that mortgage insurance does not have to be paid forever. After a certain period of time and when certain conditions are met, mortgage insurance is no longer required to be carried on the mortgage.

FHA Secured Loans

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Information on FHA Secured Loans

Keywords:
FHA Secured Loans, fha loans, fha info

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In 1965 the Department of Housing and Urban Development (HUD) was formed. Within HUD operates the Federal Housing Administration (FHA), which has the primary responsibility for administering the government home loan insurance program. This program allows a first time home buyer who might otherwise not qualify for a home loan to obtain one because the risk is removed from the lender by FHA who insures the loan for the lender.

The most popular FHA home loan program for a first time home buyer is by far is the 203(b). This is your standard fixed rate loan for 1-4 family owner occupied houses and only requires a minimum of 3% from the borrower. This loan also permits 100% of their money needed to close to be a gift from a relative, non-profit organization, or government agency.

The main advantage to a FHA home loan is that the credit criteria for a first time borrower are not as strict as Conventional Loans sold to Fannie Mae (FNMA) or Freddie Mac (FHLMC). Someone who may have had a few credit problems or no traditional credit should not have a problem obtaining FHA financing. Also, FHA home loans are assumable, allowing a person to take over the mortgage without the additional cost of obtaining a new loan. In addition, the seller or lender must pay for part of the "traditional" closing costs (called non-allowable costs) while a borrower’s allowable costs can partially be wrapped into the loan. The monthly mortgage insurance premium is cheaper for an FHA loan verses a conventional loan with 3% down. Finally, FHA loans may may require less income to qualify as they will exceed the Conventional debt ratios of 28/36% as their standard is 29/41%. To learn more about debt ratios, please see the income section.

Many people make the mistake and assume that FHA loans are only available for first time home buyers. This is not true. FHA loans are available to anyone, whether your first or fifth home and can be used to purchase a home or refinance a home. If refinancing a home the current loan DOES NOT have to be an FHA loan.

The greatest disadvantage of FHA home loans is that FHA limits the loan size that a borrower can borrower Please see the link for FHA Loan Limits in your area. Others may try and convince you that the FHA upfront mortgage insurance premium (MIP) is a disadvantage. However this amount makes just a very small increase in the borrower’s month payment and is partially refundable. See the section on MIP refunds for more information.

There are several notable FHA home loan programs available as characterized below.

Bad Credit Mortgage Loans – How Does Your Fico Credit Score Affect Your Loan Approval?

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How “bad” is bad credit? If you can pull your credit report yourself and get a copy of your FICO credit score, that will give you a good idea. Here is a general idea of the FICO score breakdown:

500 ? 580 – Poor Credit – You should be able to get a home mortgage loan if you are willing to make a down payment, probably somewhere between 5-20%. You will probably need a sub-prime mortgage loan with a slightly higher interest rate.

580 – 620 – Fair Credit – You’re right on …

Keywords:
FICO score, mortgage loan approval

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How “bad” is bad credit? If you can pull your credit report yourself and get a copy of your FICO credit score, that will give you a good idea. Here is a general idea of the FICO score breakdown:

500 ? 580 – Poor Credit – You should be able to get a home mortgage loan if you are willing to make a down payment, probably somewhere between 5-20%. You will probably need a sub-prime mortgage loan with a slightly higher interest rate.

580 – 620 – Fair Credit – You’re right on the edge. You may be able to get 100% financing or you may need a small down payment to make the loan work. Depending on how much money you put down, you may be able to get prime interest rate.

620 – 640 Average Credit -You should get a 100% home loan financing. You should not need to have a down payment. You should be able to get a low interest rate.

640 – 700 Good Credit – You should be able to be approved for a 100 – 125% home mortgage loan. You should be able to get a great interest rate.

700+ Excellent Credit – You’re in the drivers seat! You should be able to get an excellent rate with excellent terms. Of course, all of these factors vary with each borrower depending on the size of loan you want and on your income and other factors.

What is the FICO Score Based On? Most of the FICO score is dependent on amounts owed and payment history. So, the fastest and best way to increase your credit score will be to make payments on time and keep old accounts open.

What Should I Avoid To Keep My Score High? If you are in the process of getting a new mortgage loan, avoid applying for or opening any new credit accounts. This can drop your credit score very quickly and make it that much harder to get approved.

Mortgage Refinance ? Should You Take Out All Your Equity?

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As more lenders offer the option to borrow 100percent of the value of property, homeowners are finding themselves faced with the question of how much they should borrow

Keywords:
mortgage refinanceing

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As more lenders offer the option to borrow 100percent of the value of property, homeowners are finding themselves faced with the question of how much they should borrow. This is especially true if you’ve established some equity in your home and are now looking toward a mortgage refinance. So should you take out a loan that equals 100 percent (or more) of the value of your home? Weigh your options before you make this decision.

The fist thing to consider is why you would want to refinance at 100 percent. Do you have a good use for the money or would it just be nice to have it? If you’re looking at buying something or paying off something, that home equity could be put to good use and the mortgage refinance at 100 percent of the value of your home could be a great idea. For example, if you have accrued significant credit card debt, you’re probably paying several hundreds of dollars each month in fees and interest. Paying the minimum monthly payments will hardly even make a dent in the amount owed and you’re likely going to pay thousands over the course of the debt. Instead of plodding along with those monthly credit card payments, a mortgage refinance could give you the money you need to pay the debt off completely. As a rule, you’ll be paying a much lower interest rate on your mortgage refinance than on the credit card debts.

Don’t forget to consider the amount of closing costs associated with your mortgage refinance, and also keep in mind that you’re going to be making a larger monthly house payment or making those payments for a longer period of time. Be sure you can meet those requirements.

You may also find that the equity can be put to good use for college tuition, buying a new car or even financing something you’ve been unable to afford any other way ? a vacation or a down payment on a vacation home. You’ve worked hard to accrue that home equity and some people feel that they should put that asset to work. A mortgage refinance will allow you to do just that.
There’s no doubt that your home equity is an asset. There’s also no doubt that many people simply accept the fact that they’ll make a mortgage payment for their entire lives. However, keep sight of the fact that you may not always have to make those mortgage payments if you put your efforts toward paying down the loan. Instead of a mortgage refinance, it may be time to focus on making some extra payments.

At the end of the day, only you can decide which course of action is best for you. If you do decide to refinance your mortgage, be sure that you have all the information you need to take this step wisely.

Mortgages. Higher Lending Charges Are Outrageous.

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After you scraped together a modest deposit for your new home you may think you’re home and dry. Think again. On top of there’s the surveyors and solicitors to pay. Then the government want a slice. You’ve got to pay stamp duty at 1% of the property’s price (if the house costs more than £250,000 the rate of stamp duty increases ? see the information at the foot of this article). Phew! You’re lucky you’ll just make it ? you’ll be a homeowner at last!

Then out of the blue t…

Keywords:
higher,mortgage,lending,charges

Article Body:
After you scraped together a modest deposit for your new home you may think you’re home and dry. Think again. On top of there’s the surveyors and solicitors to pay. Then the government want a slice. You’ve got to pay stamp duty at 1% of the property’s price (if the house costs more than £250,000 the rate of stamp duty increases ? see the information at the foot of this article). Phew! You’re lucky you’ll just make it ? you’ll be a homeowner at last!

Then out of the blue the mortgage lender sends you a new bill ? another £1,500 please Sir. They’ve called it a Higher lending Charge (HLC) and it’s charged if you borrow more than 90% of the value of the house. About 75% of all mortgage lenders charge it and £1,500 is about the average they ask for.

And guess what ? they money you pay won’t benefit you in any way whatsoever! Not one jot. You’re being charged for a form of protection insurance that protects the mortgage lender, not you. The HLC pays the lender if you default on your mortgage, your property has to be repossessed and the sale proceeds are less than the outstanding balance on your mortgage. In theory the HLC then pays out the shortfall to the lender but in practice many lenders carry the risk themselves so the HLC is just an extra fee to offset a higher lending risk.

But an HLC doesn’t let you off the hook! If your home is repossessed and there’s a shortfall, you still have to pay the shortfall back to your lender – they’re sure to chase you for the money.

Whilst most of the lenders who charge HLC’s will readily agree to add the charge to your mortgage, that’s little consolation. In any case this means that you’ll end up paying interest on top of the charge. Then, over a 25-year term, your HLC will have cost you closer to £2,700!

In our opinion HLC’s should have died out with the dinosaurs. If a lender is worried you’ll default, they shouldn’t have lent the money in the first place. And with all today’s hi-tec credit checks and the risk based assessments used to process your application, you’d think the lenders were doing enough to protect themselves. In any case you may also end up paying a small interest premium for a 90% plus mortgage ? so in practice you’re being charged twice for the same risk!

The Nationwide Building Society, who incidentally do not charge HLC’s, recently reported that during the last five years £1 billion has been charged in HLC’s by some 800,000 borrowers. It also found that just over 500,000 were first time buyers ? largely youngsters struggling to buy a home. We believe that HLC’s are just another money making ploy for the mortgage lenders. By the way, the Higher Lending Charge used to be called a Mortgage Indemnity Guarantee, but they are all the same – only the name is different!

We think it’s time for the Office of Fair Trading to open up the box and take a look inside in the same way as they did with credit cards. The OFT recently ordered many credit cards to reduce their charges by up to 40%. A bit of that magic would do wonders for Higher Lending Charges!

Current Stamp Duty rates on house purchases in the UK

Houses under £125,000 No Stamp Duty

Houses £125,000 to £249,995* 1%
Houses £250,000 to £499,995* 3%
Houses over £500,000 4%

*HM Inland Revenue rounds up house prices to the nearest £5. Therefore, a house sold for between £249,996 and £249,999 will be rounded up to £250,000 and they’ll charge you 3% Stamp Duty on the lot!

Information correct as from the April Budget 2006.